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Norman Myers presents a similar example taken from the Bacuit Bay area in Palawan Island in the Philippines. This involved a drainage basin having a mean slope of 30 degrees. Employing a discount rate of 10%, he finds that potential revenues from a decade of continued logging in this area would have a present discounted value of U.S.$9.6 million or only $960 thousand per year. However, continued logging led to a worsening of already serious problems for fishing and tourism arising from erosion, siltation, and bay sedimentation.

In the absence of logging, the fishing and tourism industries in the area could generate revenues totaling $54 million, in discounted present value. With continued logging, however, the present value of revenues from fishing and tourism would be but $21.4 million. Logging, then, will destroy $33 million in economic values in fishing and tourism. Therefore, for each dollar gained from continued logging, four dollars will be lost in the fishing and tourism sectors. Is this very bad economics?

These oversimplified examples are based on a very limited number of cases. Nevertheless, they do suggest that over the past few decades, environmentalists may have erred in focusing so strongly on the social and environmental costs of tropical deforestation, many of which are not easily measurable and which in case have gone largely unheeded by governments. Economic arguments against present patterns of forest utilization are available, and they can be powerful even when the discount rate, so much maligned by many environmentalists, is deployed in the analysis.

Destruction of equity values

Western environmental organizations advocating curtailment of tropical deforestation have many critics especially in tropical countries. Critics have charged environmentalists in North America with intellectual imperialism. To these critics, a strong focus on environmental values is often viewed as “a luxury of the rich,” that fails to recognize that the need to overcome widely shared poverty in the short term, so, it is argued that the goal of reducing poverty to medium term overrides such longer-run issues as preservation of natural habitats and biological diversity.

These claims merit serious consideration, from the point of view both of present and future generations of tropical peoples, especially landless rural dwellers. Insofar as the current generation is concerned, it is not at all clear that curtailing of tropical deforestation is incompatible with greater equity in the distribution of income. Rather, a case may be made for the argument that the poor may have been bearing a disproportionately high share of the costs, and receiving a disproportionately low share of the returns from recent patterns of tropical forest utilization. That being the case, accelerated conversion of tropical forest justified in the name of the poor would have led to a worsening, rather than an improvement, of the impoverishment of the poor. Let us develop these points.

Costs

First, focus on the present generation.

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Source:  OpenStax, Economic development for the 21st century. OpenStax CNX. Jun 05, 2015 Download for free at http://legacy.cnx.org/content/col11747/1.12
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